Housing

Let us get down to brass tacks: Britain has a serious housing crisis. When demand for housing (people wanting to rent or buy) exceeds supply (the stock of housing) the effects are not good for society. House prices and rents rise, making it difficult for people to pay for their accommodation. This reduces the net income available for other things, makes people anxious and directly affects their quality of life.

If people migrate to the UK or wealthy foreigners invest in the housing market, this reduces the housing supply for the domestic population unless construction goes up. This drives-up house prices and the levels of frustration, especially when people have to share their homes with their parents/children, are priced out of living in their communities or see empty houses that are investments, rather than homes. This is especially so in Britain, a nation of home owners and this state of affairs leads some to conclude that the housing crisis is caused by the EU and its freedom of movement principle. It leads to a perception that perhaps EU mobility results in a lack of housing for the native population. This is powerful argument during the period leading up to the EU referendum in June 2016; it connects with the EU immigration and EU benefit tourism, topics I have previously written about, and is presented as another reason for Britons to vote to Leave the EU (i.e. Brexit). So it is important to address the nature of the British housing crisis and the EU’s role in it.

The first thing to be said is that there is no shortage of analysis of either the housing problems or the possible solutions, but the latter basically boil down to balancing housing demand and supply, together with the political will to solve the crisis.

My home is my castle: demand for housing

Numerous factors influence housing demand. A critical factor is price: at higher prices, real incomes fall and people will reduce their demand while alternatives to owning a property, such as renting, become more attractive. There is a multitude of other factors that are important, such as population dynamics (population size, migration, birth and death rates, age structure, etc.), incomes of households (some may shift from renting to buying, move to a bigger property, buy a second property, a holiday home, etc.), social and lifestyle trends (e.g. late marriages, divorce rates, decisions to remain single, etc. all increase single households and thus demand), availability of credit and interest rates (higher rates make ownership less affordable while lower ones achieve the opposite and restriction in the supply of credit reduces demand for housing and can lead to a fall in house prices) and other influences such as government incentives (to buy, to rent or to buy to rent) and expectations in terms of house /land price developments (speculation).

Since all the above influence housing demand, estimating future demand is a complex process. What is simple though is that immigration, whether from the EU or elsewhere, is only one factor among many others, the majority of which are more influential in terms of stimulating demand for housing in the UK.

Nevertheless, as far as the EU’s freedom of movement of people is concerned, there are two further issues to consider:

EU migrants are a sub-set of the migrants to the UK. In a separate post, I showed that of the 498,040 people who migrated to Britain in 2012, 80,196 or 16.1% were Brits returning home, 157,554 (31.6%) were from the EU and 260,290 (52.2%) were from the Commonwealth and other countries that Britain is entirely responsible for, rather than the EU;

EU migration is not a one way street and not all roads lead to London and the South East. In the same year, 321,000 people left the UK, a proportion of which migrated to other countries in the EU.

Consequently, even if EU migration was the only issue affecting demand for housing, which is clearly far from being the case, EU migrants do not constitute the majority of immigrants to the UK. Furthermore, the same process is happening in other EU countries that receive Britons.

A number of housing demand studies demonstrate the same trend in the UK: housing demand is increasing significantly and the government and the rest of the housing system, not least the planning system and the construction industry, need to respond in order to ensure that the supply covers the future demand. After all, it is not unusual for populations to increase and housing policy and system must respond in order to deliver affordable, quality housing. The public has the right to expect this irrespective of the particular set of factors that may drive housing demand (i.e. whether immigration is an issue or indeed whether it is from the EU or elsewhere) at a particular point in time.

A comprehensive estimate of housing need and demand in England was published by the Town and Country Planning Association. It estimated that England alone required 240,000 – 245,000 additional homes each year until 2031 in order to meet rising demand. Many similar projections have been made long before EU migration to the UK became an issue of debate post-2007.

Housing supply: decades of neglect = housing crisis

The issue then is how much housing is being built and is it sufficient to meet the demand for 245,000 new units per annum? The UK housing construction data (supply) are presented in the Table below.

Housing construction (permanent dwellings completed) in England have fluctuated between a peak of 170,610 in 2007/8 and 108,870 in 2011/11;

The point during which it was perceived that there was an acute housing crisis was around 2005 but since then, the trend in terms of housing supply, albeit fluctuating slightly, has actually been downwards;

By definition if the target for England is 245,000 new units per annum, the equivalent for the UK will be much higher. The last year of housing construction data (2014-5) shows a gap of 93,000 even against the lower target for England;

In a well-functioning housing market where the citizens, planning authorities, construction industry and the government jointly perceive a housing crisis, the normal response would be for housing supply to increase to reach the target of 245,000 new housing units per annum for England. If this does not happen, it adds to the affordability pressures experienced;

If here is such a systematic lack of construction, then surely the respective people in charge of housing policy, finance, planning, construction, etc. are responsible.

To Scapegoat or not to scapegoat (or holding a mirror to British policy makers)

A considerate British voter in the forthcoming EU referendum might reflect on the following issues:

The EU has no control in the housing sphere: this is exclusively the remit of national governments, in this case successive UK governments;

There are many factors affecting demand for housing, of which EU migration is only a secondary factor;

The EU related migration accounted for 31.6% of the migrants to the UK in 2012, but the UK also sent its migrants to EU countries – the EU freedom of movement cuts both ways;

The UK has systematically produced fewer housing units than it needs for a period of decades despite projections of massive unmet demand for housing ;

The UK, including its politicians, its construction industry and its planning system (local authorities) are responsible for ensuring that supply keeps-up with demand and that housing is affordable. This requires responding to changes in housing circumstances, regardless of what is driving them (e.g. prices, birth rates, speculation, constrained land release, immigration, interest rates, tax incentives, etc.);

Despite mounting pressure, regular public outcries, evidence of shortage and affordability problems, etc., the UK only managed to build a paltry 150,000 housing units in 2014-5. This is a damning indictment of Britain, not least its politicians, policy-makers and industry.

It is up to each individual to form their own opinion of where the blame for Britain’s chronic housing crisis should rest. Scapegoating EU migration (which took off from 2004) for problems which have been systematically neglected in the UK amounts to a disgraceful attempt to blame others for issues which Britons have failed to tackle over and over again and are still doing a miserably bad job with.

In this context, it is worth addressing two issues which policy-makers, politicians and the Leave the EU campaign will almost certainly raise in defence of the indefensible: the lack of adequate and affordable housing in the UK, which is a basic human right.

Clutching at straws 1: the crowded island myth

Many, if not most, Britons appear to be convinced that the UK is a very crowded island and that there is simply no space left for housing construction, let alone to accommodate migrants from the EU or anyone else. Certain segments of the media that are biased against the EU, as well as the general Leave campaign, including populist political parties, are keen to emphasize this argument, so let us examine the claim.

The most comprehensive analysis of this issue (UK National Ecosystem Assessment) concluded that only 6.8% of the total land area of the UK is urban (10.6% of England, 1.9% of Scotland, 3.6% of Northern Ireland and 4.1% of Wales). But being urban does not necessarily mean that it is built upon since such areas also contain gardens, lakes, etc. The most detailed analysis ever conducted found that only 2.3% of England is built upon, the rest is natural. Elsewhere in the UK, the figure is less than 1%. Contrary to popular misconception, only a tiny fraction of Britain has been concreted over. Britain is not a crowded island. It can and must build more housing for the benefit of its citizens.

Another common perception is that EU citizens are benefit tourists, and that they strain the welfare state by having a higher demand for social housing. But the data show that about 17% of UK-born and 18% of foreign-born individuals live in social housing. That means that foreigners are on par with native Britons when it comes to access to social housing. However, when it comes specifically to EU migrants, the popular perception is even more incorrect. Studies demonstrate that citizens of EU-8 countries who arrived in the UK after accession are 57% less likely to live in social housing than native residents. More recent studies indicate that over 90% of immigrants in the UK are in households that are eligible to apply for social housing (p.3) and confirm that EU (and EEA) citizens are less likely to be in social housing than Britons. The research also shows that, once factors like the demographic structure, location and economic circumstances are taken into consideration, immigrant households are significantly less likely to be in social housing than equivalent native households. Another popular myth bites the dust.

Build, Build, Build

The housing crisis is fundamentally a matter of demand and supply and the policy choices each country makes about how to prioritize public investment and other policy decisions. For decades Britain has emphasized home ownership as the one and only housing policy priority. It has constrained social housing construction for ideological and financial reasons, while at the same time forcing social housing to be sold at discount. Its recent policies have stimulated a boom in buy-to-rent, which has increased private renting but also boosted house prices and exacerbated the affordability problem. At the same time, policy makers have not stimulated the planning system to release sufficient land for housing construction, mainly due to the NIMBY (Not In My Back Yard) syndrome. In the meant time, the construction industry has shown much more readiness to speculate in order to accumulate, rather than increase construction efficiency, productivity and quality. None of this has stimulated housing supply greatly while housing affordability has declined.

Housing is a matter for each of the 28 nation states of the EU. Some countries, like Germany, build enough housing to meet the needs of their citizens whose quality of life is significantly improved by having sufficient, high quality, affordable homes to rent and/or buy (the recent refugee crisis could not have been planned for in advance. By definition, a surge of 1.1 million asylum seekers in 2015 was not part of the housing forecast). Others, like Britain, do not build enough housing. This is not because of insufficient land, EU freedom of movement of people or other handy excuses for systemic failures on the part of British politicians and their policies, the British planning system and the British construction industry. Any such interpretation amounts to the politics of scapegoating others for one’s own glaring failures and I, for one, will have no truck with it.

Is the EU responsible for the British housing crisis: The British housing crisis has been decades in the making. Strong EU immigration is a relatively recent phenomenon.

Is the British government responsible for the state of British housing: Its policies have focused almost entirely on housing ownership (tenure), rather than housing construction.

Should I vote to leave the EU because of the state of British housing: Britain alone is responsible for regulating demand and supply to deliver sufficient and affordable housing.

Housing as a basic necessity

Someone asked the other day: “If you had to choose one issue that fundamentally differentiates Germany from Britain, what would it be?” This is a tough question to answer since the response depends directly on what the individual considers to be important and we all prioritise things differently.

For me, the single most important thing, regardless of country and its level of development, is the extent to which our essential human needs are fulfilled or not. The definitions vary but the three immediate “basic needs” have traditionally been food (and water), clothing and shelter, followed by sanitation, education and healthcare. In the sense of fulfilling our basic needs, the key difference between Britain and Germany for me personally, is the issue of shelter or housing. The economic, social and cultural right to adequate housing and shelter is recognised in many national constitutions, the UN’s Universal Declaration of Human Rights and the International Covenant on Economic, Social and Cultural Rights. But this right is not simply about having a roof over one´s head, it is also a matter of whether it is affordable to households with different levels of income, as well as whether people are able to enjoy security of tenure (without fear of unreasonable eviction, rent hikes, etc.), which is fundamental to our quality of life.

To my mind, Germany broadly fulfils the right to housing, as well as affordability and security of tenure. But it is far from clear that Britain does; indeed according to some indicators, the housing market may even be moving backwards.

“… the AngloDeutsch™ Blog will compare and contrast the housing system in Britain and Germany. There is significant potential for policy-makers in both countries to learn from each other, despite the clear specificities and uniqueness. I plan to focus on key themes such as: the differences in the housing structure in the two housing systems; the variation in the house price trends and the reasons for it; the differences in the housing finance system; the reasons why one housing system has consistently delivered high quality, affordable homes, whereas the other has consistently failed to do so over several decades.”

This blog post sets the broad nature of the housing systems in Britain and Germany, with reference to the European Union (EU) context. The analysis below covers the issue of tenure, dwelling type, size and quality, dwelling construction (supply), adult population (demand), price and affordability. It demonstrates that the housing systems in Britain and Germany are fundamentally different in some ways, yet remarkably similar in others.

Housing Tenure: owner occupation, social renting and private renting

Housing tenure basically refers to the legal rights of different forms of housing ownership and occupancy. The first distinction to note is owning and renting; whereas the owner buys a property (new or existing), the renter makes a regular payment to the owner for the right to live in a property. If the rent is paid to a private individual / institution, this is private renting. If the rent is paid to a local authority, housing association or cooperative, it is known as social renting.

Table 1 illustrates the tenure differences between Britain and Germany.

The key difference is that whereas Britain is primarily a nation of homeowners (70%), Germany is a nation of renters (55%) and has one of the lowest proportions of owner occupiers in Europe. These rather dated statistics reflect the fact that housing tenure is not collected on a like-for-like basis across countries. A notable feature of the British housing system is the recent decline of owner occupation in favour of private renting. To counteract this issue and to include the EU dimension, I Table 2 presents Eurostat data with a focus on population by tenure status.

On this basis, by 2013 Germany had also become a nation of owner occupiers (52,6%) but renting remained equally important (47,4%) in terms of population. The respective figures in the UK are 64.6% and 35.4%, highlighting the fact that the level of private renting has experienced a revival in recent years, partly as a result of government policy. In the EU-28 countries, the situation is much closer to Britain than to Germany (70% and 30% respectively). .

Housing type: flats, detached and semi-detached dwellings

Major tenure differences exist in Britain and Germany but the variance is even more pronounced when it comes to type of dwelling that people actually live in. Britain is very much a nation of house dwellers, with 84,8% living in detached or semi-detached homes. By contrast, Germany is even more a nation of flat/apartment dwellers (53,2%) than in the EU-28 (41,6%) as a whole. Britons obviously love their houses and gardens but I am not sure if the rest of the EU loves flats, even if a large proportion of the population in Europe certainly lives in one.

Table 3: Distribution of population by dwelling type, 2012 (% of population)

Housing Quality

An important aspect of quality of life is not only having a roof over one´s head, but the quality of the housing conditions that people live in. The overcrowding rate (% of people living in an overcrowded dwelling) in the EU-28 was a remarkably high 17.2% in 2012. The figure was much lower in UK (7%) and Germany (6,6%) according to the Housing Statistics Year Book (2014). The situation in the two countries is remarkably similar but 6-7% of people living in overcrowded dwellings is still a relatively high figure.

The severe housing deprivation rate is defined as the proportion of persons living in a dwelling which is considered as being overcrowded, while having at the same time at least one of the following housing deprivation measures: lack of a bath or a toilet, a leaking roof in the dwelling or a dwelling considered as being too dark. Across the EU-28 as a whole, 5.1 % of the population experienced severe housing deprivation in 2012. The equivalent percentage was much lower in the UK (2%) and Germany (1,9%).

Within the population at risk of poverty (households with a disposable income per person below 60% of the national median), the overcrowding rate was 29.4% in the EU-28, but the figure was much lower in the UK (13,6%) and Germany (17,6%). Poverty and poor housing conditions go together to large extent.

Dwelling Size

When it comes to dwelling size, unfortunately the UK data are not comparable with other countries. The average dwelling is almost 107 m² in size in Germany, compared with 102 m² in the EU-28.

Table 4: Size of the dwelling by tenure status, 2012 (m²)

Dwelling Type

Britain

Germany

EU-28

Total

– unreliable data

106.8

102.3

Owner

– with mortgage or loan

– unreliable data

128.9

105.2

– without mortgage or loan

– unreliable data

135.1

124.5

Renter

– market price

– unreliable data

76.8

78.6

– reduced rent or free

– unreliable data

82.4

80.7

Source: Eurostat ad-hoc module ‘Housing Conditions’ (HC020)

Space standards are significantly more generous in dwellings that are owned than those that are rented in both Germany and the EU. The private rented sector has the lowers dwelling size of all.

Broadly the same trends are likely to apply in the UK. For example, the English Housing Survey Housing stock report found that. “The average useable floor area of dwellings in England was 91 m². However some 52% of social sector bungalows, 50% of social sector flats and 35% of private rented flats had a total floor area of less than 50 m²” (2008, p.8). The indications are not only that the average dwelling size is smaller in the UK than in Germany and the EU-28. There is evidence that the average new average new home in the UK is actually getting smaller over time (76 m²). Elsewhere, the average size of new homes is increasing.

Housing Supply

House developments are influenced by many factors but a strong relationship exists between house prices and other indicators of demand and supply. Specifically in terms of supply, housing construction (i.e. building permits issued and housing units completed) is related to house price developments. If supply is out of kilter with demand, it may not matter too much in the short-term, but over a period of decades it can lead to acute housing stress and eventually crisis. The trend in terms of supply of housing in Britain and Germany is illustrated below.

Graph 1 illustrates that Germany has outperformed Britain in terms of new supply of housing during the last decade or so. As demand for housing increased post-2008, there is evidence of supply responding accordingly. The German government forecasts 270,000 residential completions in 2015, the highest number of completions in over a decade, and argues that construction has reached the amount needed to keep up with future demand. By contrast, in Britain a country which is acknowledged by all and sundry to be in the depths of a full-blown housing crisis, supply has flat-lined around 140,000 completions per annum and government forecasts 135,000 completions in 2015. This suggests that housing supply is significantly more responsive in Germany than in Britain, despite not actually experiencing a housing crisis. The reasons for this critical difference will be explored in future blog posts.

Total Dwelling Stock and Adult Population: demand

Another way to examine the situation is to examine the changes in adult population (over 18 years of age) and the extent to which the total dwelling stock is keeping up with the changing demand. During the period 2002-2013, the adult population in Germany increased by 1.8 million. During the same period, the dwelling stock increased by over 2 million units. By contrast, whereas the adult population in Britain increased by 4.4 million, the dwelling stock only increased by 2.1 million units (see Hypostat 2014, 26 Population 18 years of age and over). I shall explore other indicators of demand in future posts to illustrate the point that supply is lagging behind demand and has done so for decades in Britain.

House Prices

The OECD’s real house price index for the period 1970 (2nd quarter) to 2013 (4th quarter) reveals fascinating trends, as illustrated in the graph below.

What the real House Price Index shows is that British house prices have historically been significantly lower than the German ones. But whereas the prices declined gradually from 1994 onwards in Germany, the UK experienced rapid price increases (with some volatility, especially during 1989-1992) until the end of 2007, when the global economic and financial crises hit. Thereafter, German house prices flat-lined for a while, but increased rapidly from 2010 – 2013, a trends that continues today. By contrast the UK prices experienced a steep decline in 2008, followed by a gradual increase from the end of 2013 onwards, a trend which has more or less continued to today.

Rising since the 1970s, the UK house prices eventually surpassed those of Germany for a five-year period (2005 and 2010) but a gap is evident once more. For Germany, the real house price index remained more or less the same in 1970 as in 2013, suggesting a fairly stable housing market.

The trends in house prices in the two countries are ultimately a reflection of demand and supply issues. Since supply is highly restricted in the UK for various reasons to be discussed in a future blog post, the trend of house price increases is almost certain to continue, especially in London and the South East region. It is only a matter of time until the UK house price index outstrips that of Germany once again.

Housing Affordability

Housing affordability is a fundamental issue. Countries have broadly the same definition for this, namely that affordable housing should address the housing needs of the lower or middle-income households. The level of disposable household income is a key factor in determining affordability and it is ultimately the responsibility of governments to create the framework conditions for the delivery of affordable housing.

Eurostat defines the proportion of the population living in households that spent more than 40% of their disposable income on housing as the housing cost overburden rate. Table 5 illustrates the situation in German, UK and EU-28 countries.

Table 5: Housing Cost Overburden Rate, 2011 (% of population)

Dwelling Type

Britain

Germany

EU-28

Owner

– with mortgage or loan

8.8

13.6

8.6

– without mortgage or loan

9.1

10.5

6.2

Renter

– market price

45

21.4

26.8

– reduced rent or free

23.9

16.5

13.3

Source: Eurostat Housing cost overburden rate (ilc_lvho07a). Data from 2011 used because there was a break in the UK time series in 2012.

As a general rule, a significantly higher proportion of the population in the rented sector experience affordability problems than in the owner sector. Furthermore, the problem is particularly important in the private renting sector (market rents) and is especially acute in Britain, where 40% of the population in the private renting sector experiences a housing cost overburden. Overall, although the housing cost overburden rate is higher in Britain than in the EU-28 countries, the rate is higher still in Germany in the two owner categories. However, the housing cost overburden rate in the private and public rented categories are significantly higher in Britain than elsewhere.

The housing cost overburden rate also varies between different groups of society. Generally, women are more vulnerable to housing cost overburden than men and, in some countries, the elderly tend to experience it more than the younger age groups. But the housing cost overburden rate says nothing about the extent to which people can afford to get a foot on the property ladder or rent privately. If people cannot do so, they have little alternative but to live with parents, friends, etc. in order to meet their housing needs.

Two Markets: different realities

Based on the analysis above, the tenure pattern in Britain and Germany is very different in some ways: there are many more owner occupiers, people living in houses rather than flats, the dwellings are smaller and getting smaller over time and there is noticeably less responsiveness in the supply of housing in the UK than in Germany.

On the other hand, the two housing markets converge in other respects: general overcrowding rate, overcrowding rate within the population at risk of poverty, severe housing deprivation rate, etc. are remarkably similar.

Other indicators are mixed: house prices suggest a fairly stable German housing market but a somewhat volatile British housing market which is likely to exceed the German prices. The owner sector seems to exhibit more housing affordability issues in Germany, yet affordability concerns are much more acute in the British rented sector, especially in the case of private renting.

The temptation may be to conclude that the differences in the two countries are not that great: wrong and double wrong! We all know the quotation: “There three kinds of lies: lies, damned lies and statistics”. Statistics are one thing but the housing reality is quite another. In the course of the next few blog posts, I intend to elucidate my starting point, namely that if I had to choose one thing that fundamentally differentiates Germany from Britain, it would be its housing system.

A humorous but apt Danish proverb is that “Prediction is difficult, especially when dealing with the future.” As the politicians finally stop pushing the merits of their policies and the British voters reflect on which way to cast their vote on 07 May 2015 general election, I will hazard some predictions about the likely general election result, as well as the political priorities that are likely to be pursued in the next few years in Britain. Most if not all of the predictions will probably come back to haunt me, but here goes nothing…

And the winner is…

My main prediction is that the Conservatives will win more seats than any other political party, even if the polls suggest that the election might be a close call. I also predict that the Conservatives will gain an overall majority, rather than a hung parliament. The main reasons for this prediction are all to do with Labour, rather than the Conservatives or their policy initiatives:

Labour is going to be decimated in Scotland and the other political parties will have almost no influence there. The clear winner is going to be the Scottish National Party (SNP) and with this development, the dynamics of Westminster-based politics will change dramatically, especially for the Labour Party.

The British public, including many traditional Labour voters, remain extremely sceptical about the final Blair / Brown years, which they blame a lot of the issues confronting society, not least being drawn into recent wars, immigration trends and the state of the economy. Many voters will switch to the SNP in Scotland and the Conservatives and/or UKIP in England.

Large segments of the general public neither relate to nor trust either Ed Miliband or any of the current crop of Labour leaders. In this respect, I cannot help but experience a sense of déjà vu in respect to the Michael Foot / Neil Kinnock era which bodes ill for the Labour Party.

The Conservatives will profit from the above and will form the next government. This is particularly the case because the UKIP vote, though significantly understated in the opinion polls, nevertheless does not seem to be as much of a threat to the Conservatives as previously anticipated. This is as much to do with the current electoral system as UKIP’s almost wilful self-destruction through incompetence combined with persistent gaffes by its candidates that undermine the message that it is neither anti-immigration nor racist. Despite it all, UKIP retains strong support in parts of England.

My other two predictions concern the issue of austerity and its implications on British society, as well as the future of Britain in the European Union.

EU Referendum: plus ça change…

Regarding the in-out EU referendum scheduled for 2017, the Conservative Party will finally have to break cover and clarify whether it belongs to the yes or no camp. If the Conservatives are able to form a majority Government, as the traditional party of business, it will ultimately side with remaining in the EU, whatever the pressures of UKIP or the antics of its noisy Eurosceptic wing. After all, the Conservative policy of offering an EU referendum in 2017 was a strategic move calculated to defang UKIP and yet placate the more rabid anti-EU Tories; it was not a decision to leave the EU per se.

Their shambolic position on the EU reflects the fact that David Cameron and other senior members of the Conservative Party, on balance, favour remaining in the EU. The political price to be paid for campaigning to remain in the EU is that this will prove to be the second and final term of office for David Cameron as the Prime Minister and possibly as an MP. The SNP, LibDems and Labour will campaign in favour of remaining in the EU. Moreover, the business sector will make its views in an increasingly vocal and forcible manner and the wider pro-EU voice will be more pronounced than has been the case hitherto. Unlike the present time where few speak up, others, such as art, culture and sport personalities will do likewise as a means of counteracting what will remain, in the main, a strongly anti-EU media.

Should a coalition Government arise, the LibDems would have to perform much better than anticipated to have a chance of running the country. The other possible coalition partner to the Conservatives, despite protestations to the contrary, is UKIP. If the latter coalition government were to emerge, the political price to be paid to UKIP will be a Conservatives campaign to leave the EU and to hold the in/out referendum in 2016, rather than 2017. A combination of the Conservatives and UKIP running to leave the EU would be a disaster for Britain (as well as the remaining EU countries already battered by the travails of Greece and holding the Eurozone together), which would be very hard to counteract, especially with the majority of the British media supporting their position. Britain would come to regret the likely outcome in the medium to long-term.

Under any scenario involving a referendum, the EU will have to show flexibility and do whatever it takes in to facilitate the UK remaining in the EU. As I have previously argued, there will not be fundamental EU treaty amendments for the sake of keeping Britain in the EU boat, such as a reform of the freedom of movement or the other three fundamental freedoms of movement, namely of capital, services (which is extremely underdeveloped) and goods. However, the EC and the EU will be more flexible in areas such as benefit entitlement in the EU area, which in any case is almost entirely determined by nation states, rather than EU directives and regulations.

If the referendum were to be held today, I believe the outcome would be an outright rejection of the EU. The great majority of British media is extremely anti-EU and anti-immigration and would contribute to a no vote. However, there could be up to two years for business, society and voters to reflect on the not insignificant advantages of being part of the EU, as well as the potential consequences of Britain going it alone in an increasingly globalised world. A re-orientation towards the old and new Commonwealth and North America is no longer adequate to guarantee current, let alone future prosperity. An emphasis on trade at the exclusion of everything else that the EU brings simply does not cut the mustard in the modern era, where problems such as environmental issues and tax agreements require regional or global responses, rather than national ones. Turning our back on 27 other next door neighbours around us in Europe is simply not sustainable in an economic, social, political or any other sense.

I retain great faith in the capacity of the British public to eventually do the right thing. The following Winston Churchill quotation springs readily to mind: “The Americans will always do the right thing… after they’ve exhausted all the alternatives.” Substitute “Brits” for “Americans” and you get the gist of what I mean. The outcome of the EU referendum will be a narrow “yes” majority to remain in the EU. The alternative does not bear thinking about.

Austerity ad nauseam

The last prediction is that the squeeze on the public sector is set to continue for the next few years and it will further transform Britain and its welfare state, resulting in a more divided and fragmented society. There will be a repeat of the pattern set in the previous Parliament, namely a dramatic public expenditure squeeze in the first two years, followed by a gradual let-up as the term of office peters out and politicians look to be re-elected.

The Conservative Party does not deny that further cuts in the order of GBP 12 billion in social expenditure are in the pipeline, even if it is rather coy about how exactly this will be achieved. If the last Parliament was anything to go by, the brunt of the cuts will continue to be borne by the more vulnerable members of society, while corporations and the wealthy are spared.

There will continue to be a lot of talk about benefit scroungers (British and EU) to justify the cuts which will fall disproportionately on the working poor and non-working segments of British society. The austerity agenda continues to offer handy political cover for a significant reduction in the size of the state and the social and welfare infrastructure, including local government. This is set to continue, spreading more deeply to areas such as police, judiciary, military, etc. since the other options have been largely exhausted. The alternative would be to put the squeeze (e.g. means testing benefits of various sorts, higher taxes, etc.) on the middle classes, the retired and the wealthy; this will not happen if the Conservatives hope to be re-elected thereafter.

In the meantime, some of the things that Britons are most concerned about such a shelter (sufficient, affordable and good quality housing), health (NHS, access and quality) and education (primary, secondary and tertiary) will continue to experience gradual deterioration. These are simply not great priorities for the Conservatives. Their traditional supporters are capable of by-passing any current or future shortcomings in state provision and directly accessing the highest quality services that money can provide, though the phenomenon of the “squeezed middle” will ensure that political capital and financial resources will still be devoted to these fundamental themes.

Instead, the (EU and non-EU) migrants will continue to act as the lightning rod for people’s frustration with a slowly crumbling system, while those that have been running these very systems for decades or generations are largely spared the British citzens’ ire. After all, if housing is unaffordable and private renting is insecure, the normal response in a modern wealthy country would be to stimulate significant additional supply and/or ensure that appropriate protections are enacted. This will not happen. If there are not enough school places or hospital beds, then public investment should deliver greater supply while still maintaining standards. This is highly unlikely to happen either. Yet it is Westminster that is responsible for recognising, responding to and securing these changes over the medium term, not individual citizens looking to access these services, regardless of their nationality, race or creed.

We shall know the result of the general election soon enough. I sincerely hope that most of the above predictions prove to be wrong, in which case I will gladly eat my hat.

Britain has had a housing issue over a period of decades which has morphed into a full blown housing crisis. So it is worth asking the question: just how do the leading political parties aim to solve the housing crisis, an issue which has been extensively discussed in the media and which directly affects people´s quality of live? This question focuses mainly on Britain, though the German situation is also touched upon.

Is there a housing crisis?

In Britain, no one seriously questions the fact that there is not only a real housing crisis in Britain, but that it is the worst it has been in a generation. In fact the worst situation in a generation does not really capture the issue since the current levels of house building in Britain are actually the lowest in peacetime since the 1920s. Unlike frequent hints and suggestions to the contrary, this is not first and foremost due to an increase in migration from the European Union (EU), which started in 2004, peaked in 2009 and been running at lower levels since. This is not to suggest that net positive annual migration does not impact on housing demand and thus ultimately on house prices. It is to argue that a full-blown housing crisis has taken decades to reach the current level, rather than being a consequence of 11 years of migration from the new accession and other EU countries. Rather, it is the direct consequence of neglect by the leading political parties over generations.

Demand for housing is not simply about migration, it is also about the overall population growth, as well as other factors such as regional migratory patterns, trend towards smaller households and various many other factors. To argue, as the media, the politicians and many ordinary people increasingly have, that the current housing crisis is due to migration in general and/or so-called „uncontrolled“ EU migration in particular is quite simply pie in the sky.

The other key factor, of course, is supply of housing and here, we see the real problem which has resulted in the current housing crisis. Unlike Germany, where demand and supply are responsive to one another (albeit it with a time lag that is caused by investors, the construction industry and the planning system taking time to react to the changing circumstances), the same does not apply to Britain and has not done so for decades. Quite simply not enough housing is constructed to meet demand. At its core, this is fundamentally the cause of the housing crisis in Britain, though there are numerous factors which deliver this unsatisfactory outcome.

Of course, one could discuss the effects of certain policies which have affected the housing policy dynamic, the most important one being the Right-to-Buy policy, which since 1980 has resulted in 1,5 million homes being sold at discount. However, this does not affect demand and supply situation. People still need to live somewhere, regardless of whether a former council owned property is now owned by the last former tenant or not.

What are the solutions to the British housing crisis?

It is safe to say that one of the two leading parties is likely to lead whichever government comes into power after 07 May 2015. So it is worth asking the question of what they are proposing in their election manifestos to solve this major social and economic ill which affects the younger generations in particular (but not only). These are, of course, also the ones which either do not vote or tend to vote proportionately less than their parents´ and grandparents´ generation.

The answer in terms of what they are proposing is, sadly but perhaps predictably, not that much.

Labour Party: promises that 200,000 houses will be built annually by 2020, meaning that the numbers will be a lot lower until then. Given that annual construction is currently running at half that number, this is a realistic target but there is little detail on how this will actually be achieved, let alone ensuring that such housing is affordable.

Conservative Party: the supply of housing is not uppermost in the manifesto, since the emphasis is on privatising whatever social housing is left, namely the stock that is used by 1.3 million families living in housing associations. There will also be a requirement for local authorities to sell the most valuable properties from what remains of their housing stock (210,000 or 5%). The sales will be reinvested in new housing supposedly resulting in a larger number of new houses built, compared with those sold. The plan is to create 200,000 Starter Homes over the course of the next five years, which will be sold at a 20% discount to for first time buyers under the age of 40.

Is the end of the housing crisis in sight?

Any way you view the election promises of the two leading parties, the numbers simply do not add up. Even if it were possible to achieve the targets set by 2020, which is in itself doubtful (for example, the Conservative manifesto more or less rules out construction of Green Belt land and the Labour manifesto does not even mention it, referring only to the Lyons Review), neither party is seriously promoting serious, long-term solutions to the housing crisis. Housing is first and foremost a numbers game; the supply has to exceed demand and it needs to be maintained over decades in order to deliver not only sufficient, affordable homes, but also an increase in standards and quality over time.

The proposed solutions are not going to do much for the large numbers of people, especially those under the age of 35, who are currently having to live with their parents or paying high rents for low quality private rented housing. The proposed solutions represent yet another missed opportunity to think long-term and prioritise investment in what is a basic human necessity, as well as something which greatly influences our quality of life. The contrast with other European countries, such as Germany, could not be greater as illustrated in a previous post comparing the German and British housing systems.

A Historic Turning Point Coming Up?

British voters are weighing up their options, but a strong element of anti-EU sentiment can be detected. The General Election scheduled for 05 May 2015 may well be turn out to be historic. If the Conservative Party wins, it is committed to holding a straight in/out referendum in 2017 about whether Britain is to remain in the EU or not. Previous posts have discussed the role of the eurosceptic Conservative wing and the role played by the Ukip party in the hardening Conservative and Labour Party stance in relation to the EU and EU-related immigration. Previous posts have also discussed a growing anti-Euro and anti-Islam sentiment in Germany, though it is materially different and not as pervasive as in the UK. No obvious anti-EU sentiment can be detected, which is why this post focuses mainly on Britain.

A reading of opinion polls illustrates that the balance of British public opinion, which has never exactly been EUphoric since joining in 1973, appears to be turning stringently EUrosceptic. The common assumption among quite a few politicians and a large segment of the media seems to be that life would become instantly better if only Britain would jettison membership of the EU, regain “control over its borders”, thus stopping “uncontrolled” migration along with excessive “interference” from Brussels in British affairs. But is this really the case? How much would actually change overnight, as far as the voters’ priorities are concerned?

Voter Priorities (2010-2015)

With the British general election not so far away, it is worth asking: just how much would actually change in people’s lives if the UK were to leave EU in terms of immediately improving life in Britain, based on the issues that matter to voters? To address this thought experiment, I have used the latest Ipsos MORI poll which asks about the top concerns of British voters.

In January 2015 four issues predominated in terms what is important to voters, namely healthcare (almost half), economy (one-third) followed by asylum and immigration (27%) and education/schools (20%). Europe/EU as an issue is on par with unemployment, which at present is a pretty low rate in the UK (less than 10% note it as being important). A further five issues are of some importance in terms of voting intentions (benefits, taxation, housing, foreign affairs and pensions).

Table 1 shows some change since 2010, but the top four priorities have been fairly consistent. What is noticeable, however, is that whereas economy and education have not changed, both health and immigration have risen significantly in importance to British voters since 2010. Perhaps surprisingly, housing is increasing in importance but remains a secondary priority for British voters.

Voter Priorities and UK vs. EU Responsibilities

On the basis of the voter’s priorities, it is worth asking the question: what exactly are the responsibilities of the British Government and what is affected by the EU? On the basis of this question, it is possible to assess what might change for Britons.

Below I discuss these issues briefly, focusing first on the top four voter priorities:

Health: The Department of Health is entirely responsible for the NHS in terms of budget, priorities, reforms, etc. The main EU influence is in enabling the citizens of the EU-28 to be fully covered when they go to other EU countries without the need for additional health insurance for work, holidays, study, etc. It also allows people to choose where they wish to be treated, if the services are better or waiting lists are shorter. Health Tourism is an issue concerning non-EU citizens, rather than for EU ones. Nothing dramatic would change tomorrow, if the UK were to leave the EU in terms of quality of care, waiting lists, response rates or any of the other key issues of concern to the British voter. If anything, choice is likely to be reduced and extra costs incurred when British citizens travel to the EU. In terms of EU residents living in the UK and their use of the health service, not much would change. If they are working, they are also paying for the NHS through their National Insurance contributions. Otherwise, they would have to insure themselves privately and still have access to health in Britain. The exception would be if the UK chooses to deport, something that is barely imaginable. Verdict: no change. There are no magical solutions to the problems of the health service in Britain. The trends are neither recent nor connected with membership of the EU.

Economy: the UK is entirely in charge of its macro- and micro-economic destiny, since it is not part of the euro and thus not affected by the eurozone rules. The UK can affect its interest rates and implement quantitative easing to its heart’s content. The Stability and Growth Pact does have requirements, such as no budget deficits greater than 3% of GDP, no public debt exceeding 60% of GDP without diminishing by 5% per year on average over 3 years. Verdict: nothing would change. The UK and many other countries have greatly exceeded these limits at a time of serious economic and financial concerns. Britain is 100% in charge of its destiny, unlike Greece, Spain, etc. The Chancellor has already set in train further drastic reductions in public expenditure in the next period of Government. There is nothing about the programme of austerity that the British Government can pin on the EU, which is probably why this has not been tried, unlike for example Greece.

Asylum/immigration: as I have previously discussed, there are three elements here. Firstly, the UK is entirely in charge of its asylum policy and can choose who to let in and who to keep out. The same applies to non-EU immigration, which Britain is entirely in charge of. These elements comprised over 68% of immigration (together with Britons returning to the UK). The EU cannot and does not interfere with this but the balance (32%) is EU migrants. Many international companies are based in Britain that require access to the global pool of human resources to maintain their standards and profitability. On balance, basing a decision to leave the EU because of the freedom of movement of people principle and perceptions of “uncontrolled immigration” in the last decade does not appear to be justified. The unemployment rate remains at 5.8% (compared with 6.5% in Germany and 11.4% in the EU), despite a long period of intense economic and financial crisis. A critical issue that affects voter sentiment is net wages, which is determined by the companies located in Britain, as well as the public employers. If Britain were to stop EU and any other form of immigration (it is doubtful that employers would welcome this) the perceived pressures on health, housing and social services would not change since most EU immigrants would presumably remain. The exception is if such a police were to be combined with (forced) repatriation, which is unimaginable at the present time. If so, in theory Britain would have to make allowance for the 1.3 million Britons in other EU countries to return from EU countries to the UK. Verdict: possible short-term gain but likely long-term loss. The change would affect 32% of Immigration (2012 data) at the very most, but asylum and immigration would not end. There would only be perceptible changes, if a policy of terminating EU immigration were to be combined with deportation. I cannot imagine the average British voter wanting this or the consequences of enforcing such a policy.

Education/schools: this is entirely the responsibility of the UK and the pressures have been decades in the making. The issue that the EU has concentrated on is harmonizing qualifications and certification to ensure greater scope for freedom of movement of workers. This is advantageous for Britons as well as for others. Verdict: no change. The children of EU migrants make-up a small percentage of all children in schools across the country. If their parents are working here, they are entitled to study in Britain unless the Government and the British electorate wishes to evoke the deportation route.

So in terms of the most important issues to UK voters, there is not a huge amount of immediate gain from Brexit, based on the top four voter priorities. I am not even going to discuss the possible losses which would be the consequence of gaining control over EU immigration. Britain is already in charge of two of the three key elements of immigration, which makes up the majority of immigration. It is an island, which gives it more protection than others in the era of globalisation. The fear that there is uncontrolled immigration from the EU is overdone. When the economic downturn started, many EU migrants simply left the UK of their own accord and the migratory pattern turned towards Germany instead, the only EU country experiencing strong economic growth. When the UK economy started growing again in mid-2014, the immigration trend started reversing (though probably influenced by the A2 countries,namely Romania and Bulgaria). In any case, if the unemployment rate is 5.8% and decreasing, it is worth asking the question: who is employing the EU migrants and benefiting from their contribution to the economy, to tax inflows and to company profits? Might the answer be Britons and Britain? If the real issue is decreasing net wages and benefits in Britain, the question is who is gaining from this development? Might the answer be certain segments of British society?

Below I address the remaining voter priorities:

Europe/EU: The issue which the EU insist on is that the freedom of movement of people (as well as goods, services, capital) be maintained, allowing all EU citizens to travel for tourism, study, work and retirement purposes. Many, if not most Britons, enjoy some or all of these freedoms in one way or another. 1.3 million Briton live in other EU countries, and a large number travel, work, study, invest (e.g. second homes and pension funds) or retire in EU countries. This is something which is currently taken for granted at present. I believe the loss will be felt much more rapidly and keenly than most British voters may realise.

Unemployment: leaving the EU might result in less European migrants, but it would not put an end to EU immigration or lead to zero unemployment. British-based enterprises compete globally for many skills essential to maintain productivity and innovation. I doubt that there would be a significant reduction in qualified labour coming from the EU.It is not certain that the agricultural, tourism, hospitality, etc. businesses would be able to satisfy their needs simply from UK-based sources. There might be a reduction in less qualified labour and thus in unemployment but this is unlikely to be more one or two percentage points and will lead to other pressures. Verdict: possible short term gain but likely long term loss.

Benefits: very few EU migrants claim benefits. Immigrants were 45% less likely to receive state benefits or tax credits than UK natives during 2000-2011. They are also less likely to live in social housing than the UK born population. EU migrants of working age who are not students, not in employment and receive some kind of state benefit, amount to 39,000 or less than 1% of all foreign nationals in the UK and 1% of all EU nationals in the UK. Recent analysis of 23 out of 27 EU countries shows that there are at least 30,000 Britons claiming unemployment benefit in countries around the EU. In other words 2.5% of Britons in other EU countries are claiming unemployment benefits, roughly the same as EU nationals doing the same in Britain. The numbers are tiny: the political and media coverage of this issue is completely disproportionate. If this is the case, an even smaller sub-set of them are living in Britain for benefit tourism/abuse purposes. Verdict: no change (but one less emotive topic for certain parts of the media and politicians to bang their biased drum about).

Taxation: the UK is in entirely in charge of all its taxes, including Corporate Income Tax, Income Tax, Capital Gains Tax and VAT. Verdict: no change.

Housing: The UK is entirely in charge of its housing policy, construction, planning system, etc. There would be fewer EU immigrants, which might affect the housing situation in terms of rent levels and house prices. However, this would only be a marginal effect since the trend in housing supply, demand and pricing is a long term trend of over 30 years and any nationality is able to buy property in Britain. I have already referred to the fact that fewer recent immigrants claim benefits and live in social housing than the UK born population. Verdict: no change. I have written the first of my blog posts comparing the British and German housing systems to illustrate aspects of this point.

Foreign affairs: in terms of foreign affairs this role is, to some extent, coordinated with the High Representative of the Union for Foreign Affairs and Security Policy for specific issues. In the main, each EU nation does its own thing and Britain is no different.

Pensions: the UK is entirely in charge of the retirement age, contributions, qualifying years, minimum state pension pensions, etc. The EU facilitates freedom of movement of people and capital, so develops rules to ensure that if people work in different countries, that their contributions are acknowledged and count towards their overall pension entitlement. Furthermore, it seeks to ensure, under the same two freedoms, that Britons and others can receive their state pension in any of the EU-28 countries without suffering from arbitrary reductions, cancellations, fees, etc. Since many Britons enjoy their retirement in the sun and have bought second homes in other EU countries (rather more than is the case in terms of EU nationals buying properties in the UK), it would appear that to be well worth remaining in the EU.

EUroscepticism: much ado about nothing?

Ultimately, it is up for each voter to assess their personal gain or loss from staying in or leaving the EU. Based on the analysis above, the anti-EU sentiment is much ado about nothing, as far as the most important issues to voters are concerned, except for the freedom of movement of people. The EU has helped to secure so many rights and opportunities across all 28 nations that it is hard to imagine life without them. It is not simply that not much would change overnight. A moment of reflection on what would be rolled back as a result of leaving the EU, should show just how much we perceive as being normal and do not even actively consider. The fact is that we usually do not miss that which we take for granted… until it is no longer there.

The new AngloDeutsch™ Blog theme will seek to compare and contrast the housing markets in Britain and Germany with the aim of showing that though the two have similarities, such as recent concerns with rents and prices and affordability, in reality, the two housing systems are so different as to be like chalk and cheese.

Housing is a Basic Right

The right to adequate housing and shelter is recognised in the United Nation’s Universal Declaration of Human Rights, as well as many national constitutions. Yet two housing issues unite British and German citizens at the moment; the perception of rapidly increasing rent levels and the fear of being unable to secure affordable housing for rent or for purchase. These issues will preoccupy the population and thus the politicians and media in both countries for the foreseeable future, hence the reason for selecting as the second main focus of the AngloDeutsch™ Blog.

Housing Crisis in Britain

In the case of Britain, the housing crisis will undoubtedly be a major talking point in the lead-up to the General Election in May 2015 and for the medium-term. The issues include low levels of housing construction compare with demand, the long waiting lists for social housing, overcrowding, security of tenure, lack of affordable housing due to soaring rents in the private renting sector and high prices of owner occupied homes, at the same time as real wages are being squeezed. It not uncommon for about 50% of net household income to be consumed by housing-related costs in certain parts of the country. The notion of housing as an investment asset, rather than as a fundamental human right is creating tensions and ill-feeling towards the older generations (especially the Baby Boomers who are perceived to be the big winners in the long asset price boom), as well as high net value investors.

Housing Issues in Germany

In Germany, there is a recent trend of increasing house prices, but this must be set alongside a long-term trend of over two decades of real decreases in house prices. The Bundesbank has been issuing warning of the dangers of an over-heating housing market. However, in reality, the recent price increases are modest compared to what has been witnessed in the UK and other EU countries in the last three decades. Nevertheless, the issue of housing affordability is becoming more of a concern, especially in cities such as Hamburg, Frankfurt, Munich and Stuttgart. The growing concerns have recently motivated the German cabinet to approve a draft law to cap rents at 10% above the regional average in areas with a “tight” housing market.

Like Chalk and Cheese

But there the similarities end; the fact is that the housing systems in the two countries are like chalk and cheese. A few points highlight the differences, though I shall not mention which countries are being referred to (in truth, it should not be hard to guess given the preamble):

The housing system in one country is pretty stable, whereas the other can only be described as volatile.

The long-term price trend is declining in one whereas it has increased sharply in the other.

One is a nation of house buyers, but the other is a nation of renters.

In one private renting is very small and only for those that cannot afford home ownership, but is widely considered to be a high quality, affordable long-term option in the other.

Social housing is also an affordable and good quality option in one, but is mostly seen as a last resort in the other, that is if people can actually get on to the waiting lists.

One has no rent control and modest tenant protection, whereas both are strong in the other.

In one housing construction is a key part of the economy and is mostly targeted at the mass market, whereas a significant proportion of new build, especially in the capital, is speculative and for the wealthy in the other.

Policy-makers can learn from each other

The second main theme of the AngloDeutsch™ Blog will compare and contrast the housing system in Britain and Germany. There is significant potential for policy-makers in both countries to learn from each other, despite the clear specificities and uniqueness. I plan to focus on key themes such as:

The differences in the housing structure in the two housing systems.

The variation in the house price trends and the reasons for it.

The differences in the housing finance system.

The reasons why one housing system has consistently delivered high quality, affordable homes, whereas the other has consistently failed to do so over several decades.

Part of the rationale for choosing the housing topic is to illustrate that the housing crisis has little to do with immigrants or outsiders (see my earlier posts on this topic), something which is increasingly referred to in the context of Britain being a small, high density island with supposedly no space for further housing construction. If anyone is to blame for the slow build-up of the housing problem, it is the “insiders” who have been entirely in charge of the housing system. They like nothing better than deflecting the blame to all and sundry, especially non-voters, rather than draw attention to themselves and the role they have played or rather systematically failed to play. This applies to housing, as well as other themes of concern in this Blog, including health and education, over which the other favourite target of the insiders for the blame game, namely the European Union, has little or no influence over, let alone control of.

I hope you will find the housing theme interesting in the next few weeks. At the same time, I shall continue to cover the issues of immigration and the European Union, so as to keep up a variety of posts.

New AngloDeutsch™ Blog Launched

Today, the AngloDeutsch™ Blog was launched. The main reason is that Britain and Germany are countries that are absolutely critical to the future of Europe and the European Union. Yet, there is currently a gap in terms of comparing and contrasting the two countries in terms of various dimensions, such as economics, housing, health, etc. within the overarching context of the EU.

It was not always so. In the same year that Britain joined the European Economic Community in 1973, the Anglo German Foundation (AGF) was established in recognition of the fact that the Germany and Britain could learn a good deal from each other, not least to improve mutual knowledge between the two countries and deepen understanding of modern society and its problems. The AGF undertook policy-oriented comparative research on the Britain, Germany and what is now the European Union (EU). It was valuable to compare and contrast countries that were not only the two largest in the EU, which also exhibit rather different social, political and economic traditions. They are two of the largest EU trading and exporting nations, the people respect each other and, despite the differences, or perhaps because of them, they can learn from each other’s ways of doing things.

In 2009 the Trustees decided to abolish the AGF, the main argument being: “… other organisations at both national and European levels are now carrying this work forward, and the need for a specific institution for this purpose is no longer so compelling.” (Anglo-German Foundation for the Study of Industrial Society,p.3).

British and German Comparisons Growing in Importance

I disagree with this conclusion. Some 40 years on, the reality is that the need for comparative analysis and discussion in relation to Britain, Germany and EU is greater than ever before and it is far from obvious which other institutions are carrying this work forward. I believe that the last Trustees of the AGF would probably be astounded at how dramatically things have evolved since their decision to end the institution.

A number of momentous developments are affecting the socio-economic dynamic in Europe:

The recession that started in 2009 has morphed into full-blown global financial and economic crises. The sovereign debt and the commercial banking crisis drag on and the prospect of deflation still looms large in Europe and elsewhere.

The Euro and the significant political and financial reform efforts connected with ensuring that it is kept alive has resulted in enormous fissures arising between Britain, Germany and the EU countries. These tensions are, if anything, increasing over time.

The political strains of keeping the Euro (and thus the EU) together, not least through various forms of austerity, have taken a massive toll on the credibility of the EU as well as the level of cooperation and trust between nation states, not least the German-British-French axis. This applies doubly so to the so-called „PIIGS“ (Portugal, Italy, Ireland, Greece and Spain) and the north Europeans, especially Germany, Holland, Austria, Finland, etc.

The UK and DE play a critical role in the future of the EU. Germany has become the undisputed albeit reluctant European hegemon, though the jury is still out as to how long this status will last. The decisions and even ruminations of Europe’s preeminent politician, Angela Merkel, reverberate throughout the EU. The same cannot be said of David Cameron (and still less François Hollande) to the same extent. Still, the UK’s role in EU, influential though diminished, remains critical to the future of the EU (independent Sterling, monetary and fiscal policy, insistence on EU reform and devolving powers to the nation state, challenge to the freedom of movement principle, possible in/out referendum on whether to remain in the EU in 2017, etc.).

These stresses and strains are part and parcel of what has become a full-blown crisis of the legitimacy of the “European Project”, as understood since it was formed in 1951 by the Treaty of Rome. A process whose ambition was to “make war not only unthinkable but materially impossible” (The Shuman Declaration, 9 May 1950) was not and could never have anything short of an economic, social and political project, even if the discourse was principally economic.

This ambition was not merely a Franco-German idea. Immediately after WWII Sir Winston Churchill was one of the first to call for a “United States of Europe” (“We must build a kind of United States of Europe. In this way only will hundreds of millions of toilers be able to regain the simple joys and hopes which make life worth living. ” 1946, p.1). The ambitions of the European Project have always been understood in its wider sense by its founder members, not least Germany, because of its particular historical specificities. However, this ambition was and remains almost entirely an economic or trade issue in pragmatic Britain.

Longstanding concerns about the legitimacy of the EU, the steady erosion of the powers of the nation state (contrary to the principle of „subsidiarity“), the implications of principle of freedom of movement and indeed of the limits to the notion of „ever closer union“ in the EU have been forced to the foreground by the Euro crisis. These issues must be debated and tackled to maintain legitimacy with the people as well as the governments of all 28 EU nation states.

Britain and Germany at the leading edge of the EU

In this context, the British and German electorates have a critical role to play in the future of their respective countries, as well as that of the “European project”. They are at the nexus of the most important debates connected with the great issues confronting Europe, not least:

The future of the Euro and the EU (e.g. EU reform and in/out referendum in 2017).

The advent of anti-EU / Euro parties (e.g. the Ukip and AfD).

The solutions to the recession / depression, austerity and falling standards of living.

The debates on the future of housing, education, poverty, migration, health, ageing, etc.

But also the more fun things in life, such as sport and traditions such as Christmas.

Through the AngloDeutsch™ Blog, launched today, focuses mainly but not exclusively on Britain, Germany and the EU, it is hoped that a contribution can be made not only to better understanding in general but also to possible economic and social policy solutions and recommendations. This would be in keeping with the tradition of the now defunct AGF, even if the focus of a blog cannot be on rigorous academic research per se.

Focusing on the British and German perspectives has gained in salience. The target group of this blog is not the academic community, interest groups or indeed the politicians, though it is hoped that they too will get involved and/or be influenced by the AngloDeutsch™ Blog. The target group is anyone who has enough humility to be willing to learn about alternative ways of doing things, discuss different views and maybe implement some of the ideas, taking into consideration the uniqueness and specificity of every nation, region and locality. This aim is illustrated in the Box below.

The AngloDeutsch™ Blog aims to contribute to the policy process in Britain, Germany and the EU more generally by raising comparative economic, social and political issues and by stimulating an exchange of knowledge, views and experience between informed citizens in the two countries, as well as the EU.

To kick off the blog, the first few themes covered by the AngloDeutsch™ Blog will include the following: